New Delhi: The finance ministry has asked public sector general insurance firms, especially National Insurance, Oriental Insurance and United India Insurance, to rationalise branches and cut down avoidable expenses to improve their financial health, sources said.
Earlier this year, the Union Cabinet decided to halt the merger process of three state-owned general insurance companies due to weak financial positions of these three companies. Instead, the government approved a fund infusion of Rs 12,450 crore to meet regulatory parameters.
The finance ministry has asked these companies to cut the flabby rationalising branches and rein in other avoidable expenses like guest houses, etc, sources said.
Besides, sources said, they have been asked to expand their business through a digital medium.
As part of capital infusion exercise, the government also approved raising authorised share capital of National Insurance Company Ltd (NICL) to Rs 7,500 crore and that of United India Insurance Company Ltd (UIICL) and Oriental Insurance Company Ltd (OICL) to Rs 5,000 crore each.
The Rs 12,450 crore capital infusion approved by the Cabinet in July includes Rs 2,500 crore provided to these companies during 2019-20. During this year, the government infused Rs 3,475 crore while announcing infusion of the balance Rs 6,475 crore in one or more tranches.
The government in Budget 2020-21 had made a provision of Rs 6,950 crore for capital infusion in these three insurance companies in order to maintain the required minimum solvency ratio.
